What happened

FibroGen (NASDAQ:FGEN) stock imploded Friday after an FDA advisory panel voted Thursday against approving the company's lead drug candidate, roxadustat. Shares of the biotech were down by around 46% as of 1:20 p.m. EDT.

So what 

The FDA convened a panel of independent experts Thursday afternoon to discuss the merits and shortcomings of roxadustat. This potential first-in-class drug inhibits hypoxia-inducible factor prolyl hydroxylase (HIF-PH) to promote red blood cell production.

Scientist working under a fume hood.

Image source: Getty Images.

FibroGen was aiming to market its HIF-PH inhibitor to the millions of chronic kidney disease (CKD) patients with anemia. But the advisory panel's votes of 13-1 against approving the drug for dialysis-dependent patients and 12-2 against approving it for dialysis-free patients are death blows for roxadustat, at least in the U.S.

The FDA doesn't have to follow the advice of its independent advisory committees, but the agency and its committees usually agree. If there weren't any available treatments for CKD patients with anemia, roxadustat might still have a chance. But erythropoietin stimulating agents (ESAs) are widely available to treat anemia.

Now what

Roxadustat has been approved to treat chronic kidney disease patients in China, South Korea, Japan, and Chile. Without the FDA's stamp of approval, however, uptake even in those countries that have approved the drug could be limited.

An application for roxadustat is under review at the European Medicines Agency. But after the lashing it received from the FDA's advisory committee, approval in the EU doesn't seem likely either. 

If you're thinking about taking a contrarian position in this beaten-down stock, it probably isn't a good idea. FibroGen management could have communicated to investors that higher doses of roxadustat increased patients' risk of death and thrombosis. Not mentioning serious safety issues to shareholders, and instead letting them learn about problems during an FDA advisory committee meeting, is a permanent red flag for any biotech company.

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